Korea Blast, Chinese Devaluation, Crude Crush the Markets

When it rains, it pours. And today, Wall Street got socked with a veritable deluge.

First, the rogue nation North Korea claimed it tested its first-ever hydrogen bomb. That would be the first time the secretive, isolated dictatorship tested a hydrogen weapon, which is potentially much more powerful and threatening than the atomic bombs the country has tested in the past.

It’s impossible to verify leader Kim Jong Un’s claims, of course. The test may have involved a hybrid weapon with only a small amount of hydrogen-based material. But seismographs did register a 5.1 magnitude quake centered in North Korea last night, which would square with what happened during the last atomic test in 2013.

Second, China’s yuan currency suffered yet another sharp devaluation overnight. The official currency fix put the yuan at its lowest level in five years, down another 0.2% to 6.5314 against the dollar. But in the offshore currency market that is dominated by international investors and other market players, the yuan dropped more than twice as much.

North Korea claims to have tested a hydrogen bomb. Do we have anything to fear?

China’s surprise devaluation in August was a key catalyst for the U.S. market’s mini-crash. That’s because it signaled the Chinese economy is in even worse shape than expected.

It also ignited fears that we will see more liquidation of Chinese reserves. That would put downward pressure on foreign asset markets, especially since it comes at the same time that major Petrodollar nations are dumping stocks and bonds like mad to plug their yawning budget gaps.

We didn’t quite hit a new multi-year low here in the U.S. But we were less than a dollar away from it at today’s low. So let’s not split hairs. The pressure is still firmly on in the commodity market, with all its attendant consequences for the credit markets.

Then just one day after we discussed “Peak Auto” concerns in the U.S., the largest car dealer in the country delivered more worrisome news. AutoNation (AN) said sales rose 9% year-over-year in December … but only with the help of “significant retail discounts” that crushed profit. Per-vehicle profit was down as much as $300 in the fourth quarter amid a rise in discounting and glut in inventory.

“It has been an ugly start to 2016.”

Long story short, it has been an ugly start to 2016. The key question is whether the rest of the year will be just as challenging — or even more so.

I’m actually less concerned about “Black Swan” type events such as North Korea’s saber rattling. That country has been doing this for years to blackmail the rest of the world into providing aid and otherwise refrain from threatening it.

The real, underlying, financial challenges in China, in currencies and in commodities are much more serious over the long term. So is the major credit cycle turn that’s been underway since last spring. That’s why I continue to counsel a cautious investing strategy for your core funds — with elevated cash levels, downside hedges, and a distinct focus on higher-yielding stocks in non-economically sensitive sectors.

In my Interest Rate Speculator service, many of the vulnerable financial and other stocks I’ve been targeting on the short side have been breaking down, resulting in a nice run of profits over the past several months.

Our Readers Speak

What’s going on in the auto industry? Will higher interest rates derail the economy? And where are stocks headed next? Those were just some of the questions you were debating over at the website in the last day.

Reader John said: “The reality of the auto industry is that in spite of its size, making and selling cars is incredibly competitive. Consequently, car manufacturing companies don’t make much, if any, money. In spite of its enormous size, it’s very hard to make an actual profit manufacturing automobiles. And the U.S. car makers have not shown themselves to be particularly good at what they do compared to foreign competitors, which hasn’t helped matters here in the U.S. at all.

“Furthermore our carmakers in the U.S. wouldn’t even exist at all were it not for government bailouts to cover up the fact that they have lost their shirts doing what they do. So when the auto industry is leading the economic charge, you really have to be suspicious about what’s up.”

Reader $1,000 Gold opined that carmakers actually make most of their money from auto lending, saying: “The money is in the financing, not the car. Anybody with a pulse has always been able to get a loan because defaults end up with a repo and a resale — which means another down payment and refi. The car is just collateral. This can go on indefinitely.”

Reader Dan also weighed in on the lending aspect of the story, offering this take: “I’m not sure why everyone is making a big deal about interest rates. They just raised by 0.25%, which is not significant. Over the course of two to three years, it might increase to where it was in 2007.

“So the interest rate is still low for loans to be affordable. With gas prices low, extra money is there to maintain good credit and people will buy bigger trucks. Ford (F) and General Motors (GM) are here to stay for the long term. They are not doomed.”

On the topic of the broader markets, Reader Gary said: “My portfolio continues to go down and I own top-name stocks. Price action is telling us to get short. Look for 1950 on the S&P in the first quarter. Wait until it drops and then load up the boat.”

But Reader Eagle495 said you may not want to start bargain hunting too soon. Here’s why: “My long-term SPY indicator went to a ‘Sell’ on the first trading day of January. While 2015 was basically a wash, this indicator went to a ‘Sell’ just after the tops in 2000 and 2007 … and to a ‘Buy’ shortly after the bottoms in 2002 and 2009.”

I appreciate all the opinions, including those I didn’t recap here. I believe the massive turn in the credit cycle that I’ve been writing about for several months will help stymie the flow of easy money throughout the economy. That includes the auto sector.

Specifically, investors will demand higher yields when they buy Asset-Backed Securities (ABS) in the secondary market. That includes securities made up of bundled auto loans. As those yields rise in the secondary market, it will force lenders to charge higher rates to their borrowers in the primary market. And that will help cool sales by pushing marginal buyers out of the market.

This is precisely the process that played out with Mortgage Backed Securities (MBS) when the subprime home loan market blew up. I think it’ll happen again. And yes, that is another negative for a broader market that is already struggling — even as we are getting oversold in the short term.

Any other thoughts you’d like to add? Then don’t hold them in. Hit up the comment section below and weigh in.

Other Developments of the Day

If I wanted to throw another market negative into the mix, I’d point out that tech darling/bellwether Apple (AAPL) is in freefall. The stock cracked a hundred bucks in the premarket, closing in on August’s intraday panic low. The catalyst was multiple reports lousy iPhone 6S sales and production cuts the firm is implementing to trim bloated inventories.

We’ve seen some weak economic data from the manufacturing sector, and concerns are brewing about weak retail and automotive sales. But the ADP Research Institute reported fairly strong jobs figures this morning nonetheless.

The private firm said the U.S. economy added 257,000 jobs in December, up from 211,000 in November and stronger than the average estimate of 198,000 from Bloomberg. The services sector added many more jobs (234,000) than the goods sector (23,000), and growth was fairly solid across all business size categories (small, medium, and large).

And if there’s anything you’d like to add to the health-care insurance debate, I’d love to hear about that below, too.

The Powerball jackpot is swelling like mad again after 17 consecutive drawings failed to produce a winner. Someone now has the chance to win around $450 million tonight if they correctly guess the five regular numbers and one Powerball. But don’t go out and spend the money yet. Your odds of winning are only 1-in-292 million.

Are Apple’s problems serious, or is this apparent sales slowdown just a blip on the radar screen? What about the latest jobs figures — do they show we’re sailing right through the foreign economic problems? Any thoughts on what you’d do if you won a cool $450 mil tonight? Let me hear about it in the comments section below.

Until next time,

Mike Larson

Recommended Articles by Mike Larson:

Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.

{62 comments }

Ross L.Wednesday, January 6, 2016 at 5:01 pm

Yesterday I spent $6 to buy 3 tickets for 3 chances to win the $450 million multi-state lottery.I normally don’t pay it any mind until it get really large like this. If I win, the first thing I need to buy will likely be new underwear. If someone else wins, I will rejoice since I will quit throwing my money away until the next time it gets really big.

$1,000 goldWednesday, January 6, 2016 at 7:21 pm

you’ll share the large one with so many people that you’re actually better off winning the little one by yourself.

Chuck BurtonWednesday, January 6, 2016 at 5:03 pm

$500 Million! That would give me perhaps give me about $150 Million after taxes from the single payment, which is all that would make sense at my age. I would put aside a few million for myself, and to give my heirs something, and set up a charitable foundation with the rest. That is about all that would make sense.

William E DavisWednesday, January 6, 2016 at 5:46 pm

A $500 million Powerball Jackpot would net you $302 million (after tax) if you take it as a ca 30 year annuity (equal payments of $$10,066,661 after roughly 40 percent federal income tax). If you take it as a cash prize, the payout is $302,600,000. After federal income tax that would be $121,176,000 or about 37 percent of the announced jackpot. Now the question is, what would you do with that money. If you set aside 10 percent for spending now you could, with some work, invest the rest in tax free T-bills/muni bonds from your state at a 5 percent return….over the next 10 years your investment would be worth more than $215 million…over a 100 years, in a trust fund with payouts of 1 percent of compounded principal and interest per year for your heirs the investment would be worth $7,057,755,271.
Worth a $2 ticket…yes…

PhilWednesday, January 6, 2016 at 5:59 pm

I believe your math is a bit off. A cash payout of $302.6 million would be taxed at 42%, which leaves about $175.5 million (not $121.2 million). There might also be some state tax, depending on where you live, but that’s deductible against your federal taxes (with limits), so you get back about 40% of your state tax, if you are in a state that taxes income.

Chuck BurtonWednesday, January 6, 2016 at 5:16 pm

As for N. Korea’s H-bomb, how do we know S. Korea hasn’t been secretly working on one of it’s own to counter their idiot neighbor? Maybe Japan and Taiwan, as well. Just what the world needs!

KenWednesday, January 6, 2016 at 5:24 pm

If I hit the Jackpot I would take half and spend it on wine, women and song, then spend the other half foolishly!

PhilWednesday, January 6, 2016 at 5:41 pm

If I hit the jackpot, I will buy a yacht, a plane, and plenty of wine and women to populate both of these toys. Of course I will also need a supercar to get from one to the other.

Charlie RayWednesday, January 6, 2016 at 5:58 pm

I have had stock in MetLife for years. It has always been an above average stock, remaining higher than other stock when bad times hit. My question has been nagging at me for a couple of years since the market has been up and down. Been thinking about rolling it over into the gold or silver market. Thoughts?

GordonThursday, January 7, 2016 at 12:56 am

Hey Charlie
People are starting to think gold again. The young people however have no perception as to its value. I watched a TV show where 8 people were given the choice of a 10 ounce bar of silver worth $140 and a $2 Hershey bar. 8 took the Hershey bar. The presenter did this in front of a coin store. Go figure.

RickinTorontoWednesday, January 6, 2016 at 6:03 pm

Apple – in the West The competition has killed Apple’s cash cow market. Other products are cool and cheaper. They banked on China for continues growth and it isn’t going to happen. They don’t have any magic bullet product to replace the growth. Smart money will shift to other momentum stocks. Their CEO might want to read RIM’s trajic history. He’s repeating history.

AlWednesday, January 6, 2016 at 6:07 pm

It is amazing that the carmaker stocks are dropping. I could understand Volkswagon’s demise, yet with sales records getting broken for most auto manufacturers, the slide can only be temporary in my opinion. Even oil prices being at an 11 year low should help carmakers. Perhaps we should have let GM and others to go bankrupt. After all it cost all of us hard earned dollars to bail them out. Bailouts usually come back to bite you, regardless of the circumstances. With all the choices we have for automobiles, a few less may even be welcomed.

JimWednesday, January 6, 2016 at 8:04 pm

I have owned a big position in Ford stock and bonds for years. I sold it all today. I think it’s the top. Jim

$1,000 goldWednesday, January 6, 2016 at 9:32 pm

i’m still in buying mode. the worse it gets, the more i’ll buy.

muleWednesday, January 6, 2016 at 6:08 pm

I had a big winner one time and I got drunk and lost it before I could turn it in, so i’ll never know what i would’ve done. )<:

I wouldn't bet what's left of the farm on those job numbers….

Mule

GordonThursday, January 7, 2016 at 1:02 am

Macy’s just join the layoff/store closing game along with other retailers. Caterpillar ditto. If only 63% of the population is working are the rest on government assistance? Where are these 200,000 jobs a month coming from? Construction is said to be slowing what gives. Ah yes the government makes up the numbers. Throw them at a brick wall and duck.

Eagle495Wednesday, January 6, 2016 at 6:17 pm

Mike,

One point I would add to what you posted: Both the Crashes of 2000 and 2007 had to do, in my opinion, with the removal of the Glass-Steagall Act in 1999 by the Republican Majority Congress….. The sponsors were Gramm/Leach/Blyle, all powerful Republicans….. A few Democrats also voted to remove and President Clinton signed that legislation to remove… I would urge anyone not familiar with G.S. to Google it…..

Basically it was made law in 1933 after the Pecora Hearings made very clear what had caused the Crash of 1929…… Once removed it allowed the same type of highly risky, highly leveraged types of trading from the 1920’s… It also removed the separation between Investment Banks and Savings Banks…. I’m no regulatory scholar, but does that mean that they can now gamble with our savings?…

I remember CNBC asking a few Brokers that were alive at the time of the 1929 Crash what they were going to do now that G.S. was no longer the law… Their response was, to a man, that they were getting out of the markets…..

Glass-Steagall is still off the books as we start down once again….. Only Bernie Sanders is making it part of his campaign to re-instate Glass-Steagall….

Personally, I am very worried…..

151Wednesday, January 6, 2016 at 6:45 pm

I would agree with you that GS should not have been removed. But to try to blame this all on one party is disingenuous. Even Robt Reich is now trying to erase his original roll in repealing GS.

Here was Bill Clinton speaking last year:
“Politicians — particularly now, in the aftermath of this crash — fear that anything they do will be held against them later if anything bad happens,” Clinton told Inc. in an interview. “Look at all the grief I got for signing the bill that ended Glass-Steagall. There’s not a single, solitary example that it had anything to do with the financial crash.”

Eagle495Wednesday, January 6, 2016 at 7:15 pm

A record $400 million dollars was brought to “lobby” for the removal…. I’m at a loss as to political parities responsibility as the sponsors were of the GOP who also had the majority…

Incidentally, the ONLY documentary ever done on the G.S. removal was called “Mr. Weill Goes To Washington” and it was done by Bill Moyers of PBS….. Pretty insightful in my opinion… Consider checking it out…..

JimWednesday, January 6, 2016 at 8:14 pm

You are certainly right about GS. But, everybody and his brother was for the removal at the time. Removing the “uptick rule” didn’t help either. We are also plagued by these front running big bloc computer traders trying to shave a half of cent on microsecond trades. We retailers are at an increasing technological disadvantage. Jim

Chuck BurtonWednesday, January 6, 2016 at 8:34 pm

And some people want to elect BC’s wife as President. LOL!

JimWednesday, January 6, 2016 at 9:34 pm

She will be indicted. One thousand two hundred classified messages on the server gets her. Her husband is a serial abuser. The best kept secret in America now is the huge crowds Trump and Sanders are drawing. Liberals are just as disenchanted as Conservatives with their respective Establishments. It’s Trump vrs. Sanders and the latest Quinnipiac Poll says Sanders wins and the Repubs lose both houses of Congress. Jim

Eagle495Wednesday, January 6, 2016 at 10:39 pm

Jim,
If that happens we will have a repeat of the 1932-1981 period, which was the greatest period of success in America’s history… And the majority of that period was under Democrat Domination… You know, the party of the 97%!… :)

Chuck BurtonThursday, January 7, 2016 at 11:45 am

I’ve been taking another look at Sanders. He seems a bit like FDR in his views, maybe not quite as leftish as that woman, and could get my vote in the primary, at least. I’m not against women, by the way. I Connie Rice had decided to run, she would have likely gotten my vote.

muleWednesday, January 6, 2016 at 8:58 pm

Here’s the vote on Gramm/Leach/Blyle :

Reported by the joint conference committee on November 2, 1999;
agreed to by the Senate on November 4, 1999 (90-8)
and by the House on November 4, 1999 (362-57)
Signed into law by President Bill Clinton on November 12, 1999

Mule (<:

Eagle495Wednesday, January 6, 2016 at 10:41 pm

$400 million seems to have influenced an awful lot of Republicans Mule (If memory serves me right: All but one)…. And a few Democrats and one Democratic President, in my opinion…. :(

jimThursday, January 7, 2016 at 12:52 pm

Our demise started in earnest with the removal of Glass- Steagall. Then the super pac’s are killing the rest of whats left. Until we start removing all elected officials that support those two items we will continue down the path to hell.

BobWednesday, January 6, 2016 at 6:18 pm

No comment on the possibility of war between the Sunnis and Shiites? For example, between Iran and the Saudi’s with the resultant affect on oil prices. Consider the other aligned nations there that would become involved.

Every year I read about the surge of December employment and I always wonder about all of the TEMPORARY employees hired for the Christmas rush. Shouldn’t this enter the equation?

JimWednesday, January 6, 2016 at 8:26 pm

For the time being OPEC will probably be further fragmented and they will only pump harder to keep cash coming in. All bets are off if they start launching Silkworm missiles at each other’s tankers and shutdown transport. Jim

Eagle495Wednesday, January 6, 2016 at 10:44 pm

Good for American oilmen….. And the Russians……

Chuck BurtonThursday, January 7, 2016 at 11:59 am

In a Sunni/Shiite war, it looks as though we will be on the wrong side. Saudi Arabia, dominantly Wahhabi culture is completely at odds with Western values. Do you know that it is a death penalty offense to worship any but Allah, in Saudi-land? Iran’s Shiites, while strongly Islamist, are much more liberal. I understand there are over 600 Christian congregations in Iran, and several dozen synagogues. Do we really want to be allied with the House of Saud?

garryWednesday, January 6, 2016 at 6:22 pm

If anyone is worried about the U.S. auto industry they should take a long hard look at TPP.
“Free Trade” is a mantra for shipping U.S. jobs offshore.
For those that disagree, explain the TAA !
TPP will insure the U.S. auto industry becomes a thing of the past.

MikeWednesday, January 6, 2016 at 6:30 pm

Low oil prices are not brining the stimulus that some people predicted. Oil and gas drilling have multiple rewards for the global economy. Time for the Saudis to realize their oil strategy has failed miserably.

151Wednesday, January 6, 2016 at 6:47 pm

Agreed Mike. Low oil prices are simply an indication of deflation.

$1,000 goldWednesday, January 6, 2016 at 7:29 pm

high prices at the pump put a buzzkill on the economy. low prices will eventually do the opposite. give it time.

JimWednesday, January 6, 2016 at 8:49 pm

The U.S. Economy is not immune to problems overseas. The Saudis are losing $600 million a day and selling stocks and bonds to cover their losses. Mexico, Brazil, Venezuela, and Ecuador are basket cases. Our neighbor to the north, Canada, is in the tank. Russia, China, Japan, and all of Europe are in great peril. This low oil scenario is symptomatic of a worldwide malaise, breaking out all over. We will be in recession with rest of them before you know it. Jim

JimWednesday, January 6, 2016 at 9:06 pm

Thirty five U.S. Oil producers filed for bankruptcy last year and twenty five more are waiting for their day in court. Our economy is also weak after seven years of an arguably non existent recovery caused by The Fed slight of hand routine. There is nothing normal about the current cycle. Jim

$1,000 goldWednesday, January 6, 2016 at 9:29 pm

recessions are a reason to buy. 2009 was one of my best years.

$1,000 goldWednesday, January 6, 2016 at 9:30 pm

…but i don’t think we’ll be lucky enough to see a recession for some time.

mspWednesday, January 6, 2016 at 6:48 pm

Lets talk about something positive and cut this negativity crap.

Did any of you watch that incrediblel triple overtime game between #1 KU and #2 OU
monday night……..KU 109 OU 106

Rock Chalk

Jay Hawk

JimWednesday, January 6, 2016 at 7:53 pm

No, because I was basking in Ben Simmons and the LSU Tigers stomping Kentucky. I should have watched your game too. Jim

RobertWednesday, January 6, 2016 at 7:10 pm

The one thing that seems to be missed is that the federal reserve has taken 450 billion out of the economy when they reduced interest rates to zero. Because we have a fractional reserve banking system that 450 billion would expand to 2.5 trillion in the economy. It is not suprising that the economy stinks. Over the seven years that is removing 17.5 trillion from the economy. As far as the 20 trillion that the U.S. has as debt, the federal reserve will just monitize it. Just like the 4 trillion that they have on their balance sheets. The statistics that the government produces are figments of imagination. The problems that are not going to be addressed are high taxes, heavy regulation, and debt. The economy has stopped growing and the forementioned items will result in nothing more than a reduced standard of living. See Argentina, Venezuela and Greece. LOL

Chuck BurtonWednesday, January 6, 2016 at 8:29 pm

As long as we are ruled by politicians, the problems you mention, Robert, will certainly not go away. And remember what the banks did with peoples’ money in those countries you mention. They halted or heavily restricted withdrawals. That could also be coming here.

Craig BradleyWednesday, January 6, 2016 at 7:28 pm

A MAN HAS TO KNOW HIS LIMITATIONS: Clint Eastwood as Det. Harry Callahan.

I own Apple Stock. I guessed correctly when I sold 100 shares in June 2016 that it would not resume its advance anytime soon. I was not completely sure, so I put in a GTC Stop Loss/Limit Order for 200 shares at $110.00/share and it was triggered in mid-August when the Chinese market began to tank. This was a turning point of sorts, in my view at least. Its too bad the exchanges are about to discontinue these 2 hedging tools. It is not a good change for most individual investors.

For what its worth, I advised an Ukrainian friend (Jewish) of mine to sell-off some of his concentrated position in Apple at $130.00/share last July to reduce risk, as I viewed things as starting to unravel. Had he done so, he would have locked-in a 30% capital gain. He would not sell but wanted to gamble (hold-out) . I warned him but to no avail.

Now, he has $0.0 profit on his large position in Apple stock, as his cost basis was $100.00 in 2014. He may go underwater this quarter. I think Apple will go back down to the low $90’s before its over. It ain’t over yet. Fact is, not everyone has “Financial Sense”.

We all have strengths and weaknesses. He may be a terrific Physical Therapist (PT), but not such a good investor. To compensate, some people need to farm-out functions they are not good at, like investing, but cautiously. Most stock brokers and financial investors are no better on average than my friend in my experience of 33 years as an investor. Some have it, others don’t. Most do not.

As Clint Eastwood said famously in his seminal movie “Dirty Harry”: ” “A Man Has to Know His Limitations”. I know mine. We ALL have them, whether admitted or not. Its up to us to manage them or suffer the consequences.

NikWednesday, January 6, 2016 at 8:26 pm

Craig…what you are talking about is Wisdom and Common Sense…something severely lacking in our Hi-Tech and Speed-of-light Society…aloha

Craig BradleyWednesday, January 6, 2016 at 7:45 pm

“FINANCIAL SENSE” QUIZ

Q: What do you think is the more probable investment class to 2X in the next ten years?:
Possible Answers:

1.) Gold: To $2,200.00/ounce by 2025.
2.) The DOW Industrials to 34,000.
3.) Residential Real Estate 2X from the most recent “comps” in your particular area.

My guess is # 1, Gold. If I had enough conviction, I would lighten-up on everything else and concentrate my bet entirely on physical gold and store it securely overseas in Singapore at: https://www.silverbullion.com.sg/

The risks are not IF, but when. Timing is important in life and investing. Get the trend right, but the timing wrong and you don’t win as big or even at all. So, to make a risky, forward-looking bet with a very uncertain immediate outlook, you have to be able to hold-out for possibly a very long time. There will be surprises, set-backs, and bad weather along the way. This is the way life really is for all of us. Count on it !

To me, this means you need sufficient cash and/or income (cash flow) to stay the course until your hunch or bet is realized (rewarded). It might be as long as 15-20 more years. Hopefully, I might live that long. Timing is always critical to investing success. There are no guarantees in life or investing, even in gold. Anything can happen.

You can win, or lose on ANY investment if you pay too much or pick the wrong time. No exceptions or “Gurus” out there. Live or die by your own wits. (Dimwits are naturally excluded).

NikWednesday, January 6, 2016 at 8:21 pm

Well..shucks why wouldn’t Apple go lower..think of how many “Cheap” IPhones..they will not be selling nor Making in China..? lolol

DianaWednesday, January 6, 2016 at 9:42 pm

Apple has over played their hand,service is sloppy, I ordered, this is a Bussiness Account.
The wrong devices showed up and they wanted to charge a restocking fee. Plus, presently I have 80 countries, I am, working with…down time is expensive.

Healthcare has killed small Business, the engine of innovation.

BillWednesday, January 6, 2016 at 9:48 pm

Mike

You say a rocky start to 2016, 2015 started the same and ended worse. 2016 and 2017 will go down in history much worse than 2008 and 2009. Optimistic, no way, pessimistic, not really, realistic, sure hope so. The real question is not when the big sucking sound will be heard, but for how long it will take the market and economy to recover and then have normal growth. I doubt the US government will be bailing out the market or providing stimulus considering its present debt situation. This world economy and markets is prime for WW3 unless you have been living on another planet, one would think otherwise. The safe spot for your future today is under the mattress or in a real good safe.

The answer in the US should be simple, bring manufacturing back to the US with millions of new and good paying jobs and put tariffs and taxes on imports to give US Manufacturing a better chance fighting slave labor in underdeveloped countries. Only Trump seems to get it and I don’t even like him, but will vote for him over any other candidate for president.

Good Investing
Bill

Eagle495Wednesday, January 6, 2016 at 10:48 pm

Never in history of America has a Conservative President brought manufacturing back to America, nor has a Conservative President ever brought America back from a Stock Market Crash and Depression…

Actually, ALL of the Stock Market Crashes have come about during Conservative Administrations because of policies supported by Conservative Congresses….

Chuck BurtonThursday, January 7, 2016 at 11:33 am

Seems like our current ultra-liberal president hasn’t done anything for manufacturing in this country, either. After going up for awhile, the manufacturing index has now fallen back to where it was in July, 2009, shortly after B.O. took office.

sueWednesday, January 6, 2016 at 10:05 pm

Thanks – one of the few articles I could understand

BillyWednesday, January 6, 2016 at 11:18 pm

Hi Mike,

Absolutely no surprises as to what is going on with the capital markets, geo-political scene, macro-economics as well as capital market technicals and cycles. As your colleague, Larry Edelson, put so distinctly, $12-$15 Trillion of Central Bank fiat, paper based, worthless and less money printing is now a mere drop in the bucket to fight the deleveraging and deflation that is raging with respect to $400 TRILLION in Worldwide DEBT and DERIVATIVES. Clearly the epicenter of the world’s problems are money and banking and financial related due to the global elites lust for greed, power, control and ownership of most of the world’s assets. The world’s middle class is just a meaningless entity to this group. The problem is, the last laugh will be on the elites…

CaineWednesday, January 6, 2016 at 11:21 pm

Regarding the automobile market, there is no doubt that further brand consolidation will come as the market globalizes. I am reminded of my youth (in the 70’s) looking at a Chilton’s manual (look it up) covering cars from the 50’s. Of course it only covered American cars. But this included Hudson, Hupmobile, Packard, Studebaker, Nash, and others, now long gone.

More recently as the market became more global, other brands have gone by the wayside, including Mecury, Plymouth, Oldsmobile, and Saturn. And Chinese cars have barely reached our shores, while Mazda and others try to remain relevant. Barring any discontinuous shift to local customization, I expect more brand consolidation world-wide.

SteveWednesday, January 6, 2016 at 11:46 pm

$ 500 million is more money than the government has , maybe I would loan them some money . After I buy a jungle retreat to hide when all the S%$T hits the fan …

JohnWednesday, January 6, 2016 at 11:59 pm

We did hit the California lottery and it was the worst experience of my life. I don’t wish that on anyone because it’s a curse…. It was suppose to be the happiest days of lives shortly turned into our worst nightmare with everyone trying to get a piece of the pie including but not limited to family, friends, annuity companies , attorneys ( lawsuits) …

LennartThursday, January 7, 2016 at 1:20 am

“It also ignited fears that we will see more liquidation of Chinese reserves. That would put downward pressure on foreign asset markets, especially since it comes at the same time that major Petrodollar nations are dumping stocks and bonds like mad to plug their yawning budget gaps.”
What will that do to the US $?

Anthony GThursday, January 7, 2016 at 3:43 am

The fairy tale economy is turning into a nightmare. The stimulus has created more malinvestment. The free market is the best strategy.

Robert CalabroThursday, January 7, 2016 at 1:03 pm

Mike: Happy New Year. I believe that we and the rest of the world are going to go through a deflationary period. The world is swimming in paper money and excessive debt. The interest on the debt as I write is 200 billion dollars a year! If interest rates go up too soon the added cost of interest payments will continue to eat away at our budget. We are in uncharted waters! Taxes and spending must be cut simultaneously at all levels of government. We need to put as much money as possible into the hands of business so that they will be able to pay down their debts as soon as possible. The Central banks of the world have caused harm to the world’s economies. There should be no more QE’S. The working poor and middle class all over the world is suffering. This suffering must be brought to an end! Social unrest is evident everywhere in the world. Warmest Regards, Robert Calabro.

ALBERTThursday, January 7, 2016 at 1:12 pm

INTERESTING

DoeThursday, January 7, 2016 at 6:57 pm

Mike, where are you when we need you? I’m skeered in my tummy, with all hell breaking lose in the markets.